F35s are part of the deterrent force South Korea deploys against North Korea. Photo: AFP: Belga/Yorick Jansens

Amid the Covid-19 crisis in South Korea, a last-ditch political battle is shaping up over the provisions of a one-off universal disaster aid handout to all Korean citizens.

Following the landslide April 15 National Assembly election victory of President Moon Jae-in’s Democratic Party, Seoul is pressing ahead to implement universal cash relief for all households, regardless of income level.

That means billionaire businessmen living in Parasite-style luxury mountainside mansions will be as eligible as the poorest senior citizen who lives in a basement and gathers used cardboard for recyclers for a living.

Given the Democratic Party’s absolute majority in the new parliament, which takes its seats from June 1, and given the discretionary emergency powers of the presidential Blue House, the move looks certain to go ahead.

Even so, in the waning days of the current parliament, the opposition United Future Party, or UFP, is resisting to its dying breath.

From 70% to 100%

The UFP argues that it is unacceptable to issue national bonds for about 3.6 trillion won (US$2.9 billion) to fund emergency relief to every Korean. Moreover, Korea’s purchase of US F35 stealth fighters has been put on hold to fund financial aid.

The government originally planned a payout, using as a standard the amount of 1 million won ($812) for every four-person household in the nation’s bottom 70% income bracket. To proceed, the government set aside a special budget of 9.6 trillion won ($7.8 billion) and submitted it to the National Assembly on April 16. 

However, in the run-up to the election, the ruling party campaigned on the need to pay disaster aid to every Korean household. That requires an additional 4.6 trillion won ($3.7 billion) on top of the existing budget set aside.

“All this is possible only when the National Assembly passes an extra budget bill,” said Kang Min-seok, a spokesman of the Blue House, on Friday at an emergency press briefing. “Please review the bill and approve it as soon as possible.”

Show me the money

The original 9.6 trillion budget was set to be funded without issuing additional government bonds.

The government plans to set aside 2.4 trillion won ($1.9 billion) by delaying defense equipment purchases and railway investments. It will also raise 500 billion won in interest on treasury bonds, and realize savings from reduced fuel costs and low interest rates.

On the defense equipment front, the government will save some of its budget by delaying payments including 300 billion won on F35 stealth fighters, 200 billion won on maritime operations helicopters and 100 billion won on Aegis destroyers. A policy officer of the Ministry of National Defense insisted the projects would not be canceled, but payments would be delayed by adjusting processes with the US.

A total of 700 billion won ($568 million) will be raised by delaying hiring government employees in the first half of the year due to the coronavirus.

Up to 2.8 trillion won ($2.2 billion) will be raised by reducing foreign credit spending and 1.2 trillion won ($975 million) by utilizing funds from the Housing Finance Credit Guarantee Fund and other existing funds.

Finally, local governments will subsidize 20% of the budget.

However, now that the disaster basic income plan has been extended to all households, the country has to fund the budget, which has increased to 14.3 trillion won ($11.6 billion). An updated budget bill was placed before the National Assembly on Friday.

Under that, the increased amount will be raised through the issuance of 3.6 trillion won ($2.9 billion) in deficit-financing bonds and 1 trillion won ($812 million) from local governments.

The voice against

Kim Jae-won, chairman of the National Assembly’s Special Committee on Budget and Accounts, said the government and the ruling party should provide more information regarding the extra budget bill. 

The ruling party and the government shot back that that it is an unnecessary procedure when people need support as soon as possible.

The UFP and other conservatives also say it is unnecessary to provide aid to the wealthy. That stance has sparked criticism from the left and generated some unusual discussion.

“Rich people pay more taxes than poor people and it is not the right time to argue about this,” Lee Jae-myung, the governor of Gyeonggi Province surrounding Seoul and a prominent left-lean politician, responded. “We need to look at the reasons why the United States, Britain, Japan, Germany, Taiwan are pouring out larger-than-imaginable economic aid measures.”

Lee agreed that the rich would not need the aid, but that “they will donate that money if they really don’t need it.”

Amid the unprecedented pandemic, other voices are calling for urgency in distribution.

“I don’t think the government has time to ask the public to submit documents for the disaster assistance fund,” Chang Ha-joon, a prominent professor of economics at the University of Cambridge in the UK told local news media. “Give it all now – and if the government thinks it’ll have to cut it to a certain extent later, it can collect the money back from high-income earners.”

Some local governments have already provided support of about 100,000 won ($81) per resident, issued via local debit cards. But most people said the modest amount has not improved their lives significantly – so there is a need for the larger, universal sum that Seoul is now promoting.

“If the government tries to revive the sluggish economy through disaster relief assistance, at least a million won should be provided to the people as a stimulus,” Kim Take-ki, a professor of economics at Kunkook University, told Asia Times.   

The coffers open

“The government should not wait for the National Assembly to pass the second extra budget bill, but inform those eligible for emergency disaster assistance in advance and receive their applications,” President Moon Jae-in said at a cabinet meeting on April 14.

“It is necessary to receive applications from those eligible for payment as soon as possible even before parliamentary deliberation,” Moon said.

Now, 2.7 million low-income households will be paid cash on May 4, while 19 million other households can start applying on May 11.

Political analysts expect the National Assembly to pass the budget bill by the end of April, given the crisis. If it fails to do so, Moon will issue a presidential emergency financial order to assist all citizens on May 13.